Building Consumer Trust

1. Building Consumer Trust New Models to Protect Your Freedom to Operate Charlie Arnot Charlie.Arnot@Foodintegrity.org www.foodintegrity.org Charlie_Arnot

2. Freedom to Operate Earning and Maintaining the Social License(Sapp/CMA) Freedom to Operate

3. Social License Earning and Maintaining the Social License(Sapp/CMA)

4. Social License Definition: The privilege of operating with minimal formalized restrictions (legislation, regulation, or market requirements) based on maintaining public trust by doing what’s right. Public Trust: A belief that activities are consistent with social expectations and the values of the community and other stakeholders.

5. The Social License To Operate Rigid Bureaucratic Higher Cost Flexible Responsive Lower Cost Tipping Point • Social License • Ethics • Values • Expectations • Self regulation • Social Control • Regulation • Legislation • Litigation • Compliance Single triggering event Cumulative impact

6. Activists Protest Mulesing

7. Mulesed Wool Bans • 2004 – Abercrombie & Fitch boycotts Australian merino wool • 2005 – American Eagle Outfitters ban announced • 2008 – Liz Claiborne (PETA is a shareholder) announced Australian wool ban • 2008 – Adidas & Perry Ellis ban wool from mulesed sheep • 2009 – John Lewis (UK department store) joins boycott

8. Earning and Maintaining the Social License(Sapp/CMA) Social License Freedom to Operate

9. Trust Earning and Maintaining the Social License(Sapp/CMA) Trust Social License Freedom to Operate

10. Earning and Maintaining the Social License(Sapp/CMA) Trust Confidence Value Similarity Social License Competence Freedom to Operate Influential Others Trust research was published in December, 2009 – Journal of Rural Sociology

11. Skills Shared Values What Drives Consumer Trust? Shared values are 3-5X more important in building trust than demonstrating competence

12. What Does It Mean? “They don’t care how much you know until they know how much you care”

13. Polarizing Perceptions

14. Values and Ethics in Our Science Based Culture Why we struggle building trust even though we care and are committed to doing the right thing

15. Three Levels – Six Stages Pre- Conventional Direct impact on me Conventional Societal expectations Post-Conventional Principle driven Questions of Values and Ethics Kohlberg’s Moral Hierarchy Lawrence Kohlberg, 1927 - 1987

16. Questions of Values and Ethics Kohlberg’s Moral Hierarchy Universal ethical principle orientation We have an ethical obligation to our employees, our animals, the environment, our customers and our communities Post Conventional Principle driven Social contract orientation The “law & order” orientation We comply with all environmental and employment laws and regulations Conventional Societal expectations The “good boy / nice girl” orientation Personal rewards orientation We take care of our land and animals because that’s when we get the best ROI Pre-Conventional Direct impact on me Punishment-Obedience

17. Questions of Values and Ethics Kohlberg’s Moral Hierarchy Universal ethical principle orientation NGOs Post Conventional Principle driven Social contract orientation The “law & order” orientation Conventional Societal expectations The “good boy / nice girl” orientation Business Personal rewards orientation Pre-Conventional Direct impact on me Punishment-Obedience

18. Sustainable Balance • Economically Viable • ROI • Demand • Cost Control • Productivity • Efficiency • Profitability • Scientifically Verified • Data Driven • Repeatable • Measurable • Specific • Objectivity Economically Viable Scientifically Verified Sustainable Systems Knowledge Ethically Grounded Knowledge • Ethically Grounded • Compassion • Responsibility • Respect • Fairness • Truth • Value Similarity Feelings Belief

19. Brands as Agents of Social Change NGOs have discovered that global brands can do what government cannot

20. Regulation vs. Market Pressure “We attack the weakest link in the company’s value chain,” Kert Davies, Director of Research, Greenpeace “We can dance with you or dance on you” “Discovering brands was like discovering gunpowder.” -

21. Coles and Woolworth Control 80%

22. Market Action Works We have also changed our store egg layouts, with free range and RSPCA certified eggs now being displayed in a more prominent position than caged eggs. Additionally, to help make the transition from caged to free range eggs easier for our customers, we have significantly reduced the price of our Coles brand free range eggs.Coles invests a lot of effort into ensuring we meet our customers' expectations and we will continue to review our policies and work with our suppliers in this regard.Yours SincerelyMelany SinclairColes Customer Care There is no doubt that there is a growing concern for the welfare of farmed animals in Australia and over the past couple of years, Coles have made some considerable commitments regarding our sourcing policies. By 2014 Coles will no longer sell any fresh pork products that have been farmed using sow stalls and by 2013 we will no longer source caged eggs for our Coles brand range. "This announcement is another indication that Coles is acknowledging that consumers do not accept the cruelty that is routinely inflicted on animals in factory farms. Coles has recently shown important ethical leadership and we challenge other supermarkets to demonstrate that they too care about the welfare of animals."

23. Transparency No Longer Optional Someone is watching everything you do all the time

24. Social Media Explosion • Today, roughly two billion people are connected to the internet • 2015 – 80 percent of the global population will have a personal mobile device that can be both a receiver and transmitter • We send 2.9 million emails every second • Upload 20 hours of video to YouTube every minute • Send 50 million Tweets a day • Spend 700 billion minutes on Facebook every month • If Facebook were a country, its 845 million users would make it the third largest on the planet behind China and India • Social media now accounts for nearly 25% of time spent online

25. An Age of Radical Transparency • Today, everyone with a cell phone is a cinematographer • Employees, consumers, customers, bloggers, social media food communities, activists, NGOs and others can all directly influence the public conversation about your company at the speed of Twitter. • The question is no longer, “will you be transparent?” but “how will you manage your reputation in an age of radical transparency?”

26. Today’s Integrated System

27. Today’s Integrated System

28. Today’s Integrated System

29. Today’s Integrated System

30. Times Have Changed “It is not the strongest species that survive, nor the most intelligent, but the ones who are most responsive to change.” - Charles Darwin

31. The Future of Food Issues Management “There is a thin line between public, private and NGO management of the food system. Consolidation creates huge opportunity but also huge responsibility. We need to create managers where and how the public, private and NGO communities work together to manage the food system.” - Ray Goldberg, founder of the Harvard Agri-Business Program, at IAMA, June, 2010

32. Integrated System Demands an Integrated Strategy

33. A Brand New Game

34. Integrated Trust Building Model

36. Building Consumer Trust New Models to Protect Your Freedom to Operate Charlie Arnot Charlie.Arnot@Foodintegrity.org www.foodintegrity.org Charlie_Arnot